F AREAST F INANCE & I NVESTMENT L IMITED A Financial Institution licensed by Bangladesh Bank under The Financial Institutions Act, 1993

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1 F AREAST F INANCE & I NVESTMENT L IMITED A Financial Institution licensed by Bangladesh Bank under The Financial Institutions Act, 1993 Prevention of Money Laundering and Terrorist Financing Manual January 2016 Eunoos Center (8th level) Dilkusha Commercial Area, Dhaka-1000, Bangladesh Phone: , , , , , ffil@bdcom.net, Web site:

2 Fareast Finance & Investment Limited Prevention of Money Laundering and Terrorist Financing Manual Contents Sl. # Description Page # Section-1: Introduction Short title Background Scope Objectives Applicability Definition of Money Laundering Reasons of Money Laundering Stage of Money Laundering Definition of Terrorist Financing Link between Money Laundering and Terrorist Financing Interpretation Variation, modification and amendment of manual 12 Section-2: Vulnerabilities of Products and Services and their overcome procedure Lease/Term loan finance Factoring Private placement of equity/securitization of assets Personal loan/car loan/home loan SME/Women entrepreneur loan Deposit scheme Loan backed money laundering Vulnerabilities overcome procedure 13 Section-3: Compliance requirement Customer identification Establishment of purpose of business relationship Identification of ultimate beneficial owner Client account monitoring Reporting of suspicious circumstances/transactions (STR) Correspondent business Staff reliability Communicating the policy Anti Money Laundering controls Employee appointment and training Anti Money Laundering risk analysis UN Sanctions 17 Section-4: Risk Assessment Procedure of FFIL Risk group: Customers Risk group: Products & Services Risk group: Business practice/delivery methods or channels Risk group: Country/jurisdiction Risk group: Regulatory risk Page 2 of 69

3 Sl. # Description Page # Section-4: Central Compliance Unit and its reporting Establishment of Central Compliance Unit (CCU) Responsibilities of CCU Self assessment Independent testing procedure Section 5: Appointment as CAMLCO & DCAMLCO Position of CAMLCO Qualification and experience Responsibilities Qualification and experience of Deputy CAMLCO: Responsibilities of Deputy CAMLCO: 34 Section 6: Branch Anti Money Laundering Officer (BAMLCO) 35 Section 7: Responsibilities of other employees Section 8: Money Laundering-training and awareness Overview Specific job training New employees Customer Service/Relationship Managers Processing (Back Office) employees Credit Officers Audit and compliance employees Senior Management/Operations Supervisors and Managers Senior Management and Board of Directors AML/CFT Compliance Officer The Combating Terrorism (Amendment) Act, Training procedures Refresher training In practice Who should be trained and when? What should training cover? Training should be risk based Independent audit function Why the audit function is necessary Why the audit function must be independent Whom they report The ways of performing audit function Internal compliance department External auditor 42 Section 9: Customer Due Diligence Know Your Customer program Know Your Customer procedure Nature of Customer s business Identifying real person Document is not enough Who is a customer? Customer acceptance policy Page 3 of 69

4 Sl. # Description Page # Customer identification What constitutes a customer s identity Individual customers No face-to-face contact Appropriateness of documents Joint accounts Change in address or other details Record keeping Introducer Persons without standard identification documentation Minor Corporate bodies and other entities Companies registered abroad Partnerships and unincorporated businesses Powers of Attorney/ Mandates to operate accounts Timing and duration of verification Know Your Employee (KYE) 52 Section 10: Record Keeping Statutory requirement Retrieval of records STR and investigations Branch level record keeping Training records Sharing of record/information of/to a customer 55 Section 11: Suspicious Transaction Report Definition of STR Obligation and reasons for submission of STR Identification and evaluation of STR Risk-based approach Tipping off Penalties of tipping off Safe Harbor provision for reporting Red flags or indicators of STR Moving customers Out of market windfalls Suspicious customer behavior Suspicious customer identification circumstances Suspicious activity in credit transactions Suspicious commercial account activity Suspicious employee activity 62 Section 12: Cash Transaction Report (CTR) 62 Section 13: Conclusion Governing Law Approval and commencement 63 Appendix-A: Know Your Employee (KYE) Appendix-B: Suspicious Transaction Report (STR) Page 4 of 69

5 Sl. # Description Page # Appendix-C: Account Opening Form Appendix-D: KYC Profile Form Appendix-E: Terms and conditions governing the deposit accounts Appendix-F: Clients' risk grading (individual and institutional account) Appendix-G: Clientele Acknowledgement Form (CAF) (Deposit Product) 81 Appendix-H: Clientele Feed Back Form (CFF) (Deposit Product) 82 Appendix-I:For of Foreign Account Tax Compliance Act ( FATCA ) 83 Page 5 of 69

6 Fareast Finance & Investment Limited Prevention of Money Laundering and Terrorist Financing Manual Section-1: Introduction 1.1 Short title This manual may be called the Prevention of Money Laundering and Terrorist Financing Manual of Fareast Finance & Investment Limited. 1.2 Background Money Laundering is being employed by launderers worldwide to conceal the proceeds earned from criminal activities. It happens in almost every country in the world, and a single scheme typically involves transferring money through several countries in order to obscure its origins. And the rise of global financial markets makes money laundering easier than ever, making it possible to anonymously deposit dirty money in one country and then have it transferred to any other country for use. Money laundering has a major impact on a country s economy as a whole, impeding the social, economic, political, and cultural development of societies worldwide. Both money laundering and terrorist financing can weaken individual financial institution, and they are also a threat to a country s overall financial sector reputation. Combating money laundering and terrorist financing is, therefore, a key element in promoting a strong, sound and stable financial sector. The United Nations (UN) was the first international organization to undertake significant actions to fight against money laundering through adopting several conventions and resolutions. Following UN action, the Financial Action Task Force on Money Laundering (FATF) was formed by G-7 countries in 1989 as the first intergovernmental body which has recommended 40 recommendations to combat money laundering in In October 2001, the FATF expanded its mandate to deal with the funding of terrorist acts and terrorist organization, and it took the important step of creating the 8 (later expanded to 9) Special Recommendations on Terrorist Financing. These 40+9 recommendations have been endorsed by over 180 countries and are universally recognized as international standard for Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) program. To oversee the implementation of these recommendations in Asia Pacific Region, the Asia/Pacific Group on Money Laundering (APG), FATF-style regional body, was founded in 1997, of which Bangladesh is a founding member. FATF has further extended its mandate to include Proliferation Financing and accumulated all 40+9 recommendations into 40 Recommendations in February In line with the international initiatives and standards, Bangladesh has also enacted Money Laundering Prevention Act (MLPA), 2012 (Ammended 2015), (repealing the MLPA, 2009) and Anti Terrorism Act (ATA), 2009 (as amended in 2012). The new acts address all the deficiencies identified in the 2nd Mutual Evaluation of Bangladesh Page 6 of 69

7 1.3 Scope conducted by APG in 2008 to determine the extent of its compliance, with the global standards. Both the Acts have empowered Bangladesh Financial Intelligence Unit (BFIU) to perform the anchor role in combating ML and TF through issuing guidance and directives for reporting agencies including Financial Institutions (FIs), as defined in section 2(g) of MLPA, 2012 (Amended 2015). This manual is in conformity with international standard and laws and regulations enforceable in Bangladesh. Board Audit Committee of FFIL shall review and confirm the meticulous compliance of this manual and the circulars issued by Bangladesh Financial Intelligence Unit (BFIU) in this regard to be reported by the FFIL s Compliance Department directly on quarterly basis Objectives The standards set out in this manual are the minimum requirements based on applicable legal and regulatory requirements in compliance with the Anti-Money laundering Act, 2012,( Amended 2015) Anti Terrorism Act (ATA), 2009 (as amended in 2012) and Bangladesh Financial Intelligence Unit (BFIU)guidelines, circulars in this respect. These requirements are intended to prevent FFIL, its Executives and clients from being misused for money laundering, terrorist financing or other financial crime(s) Applicability According to section 25 of the Anti-Money laundering Act, 2012,( Amended 2015) FFIL Board of Directors through the company Executives must ensure that the legal duties resulting from the regulations set out in this Act and Bangladesh Financial Intelligence Unit (BFIU) guidelines regarding AML are fulfilled by all of FFIL s subordinated enterprises, branches, subsidiaries and affiliates in Bangladesh and abroad. Wherever any regulations are stricter than the requirements set out in this manual, the stricter standard has to be applied. If any applicable laws are in conflict with this manual, the relevant entity must consult with the legal department and the Chief Anti Money Laundering Compliance Officer to resolve the conflict. If the minimum requirements set out in this manual cannot be applied in a certain country for the subordinated enterprises, branches, subsidiaries and affiliates, because of local law or cannot be enforced due to other than legal reasons, it is to be ensured that FFIL will not enter into a business relationship, continue a business relationship or carry out any transactions. If business relations already exist in that country, it has to be ensured that the business relationship is terminated regardless of FFIL s other contractual or legal obligations. Page 7 of 69

8 1.4 Definition of Money Laundering Money Laundering is the participation in any transaction that seeks to conceal or disguise the nature or origin of funds derived from illegal activities, e.g., fraud, corruption, organized crime, or terrorism etc. According to Section 2(v) of the Money Laundering Prevention Act 2012 (Amended 2015) money laundering means: (i) knowingly moving, converting, or transferring proceeds of crime or property involved in an offence for the following purposes:- 1. concealing or disguising the illicit nature, source, location, ownership or control of the proceeds of crime; or 2. assisting any person involved in the commission of the predicate offence to evade the legal consequences of such offence; (ii) smuggling money or property earned through legal or illegal means to a foreign country; (iii) knowingly transferring or remitting the proceeds of crime to a foreign country or remitting or bringing them into Bangladesh from a foreign country with the intention of hiding or disguising its illegal source; or (iv) concluding or attempting to conclude financial transactions in such a manner so as to reporting requirement under this Act may be avoided; (v) converting or moving or transferring property with the intention to instigate or assist for committing a predicate offence; (vi) acquiring, possessing or using any property, knowing that such property is the proceeds of a predicate offence; (vii) performing such activities so as to the illegal source of the proceeds of crime may be concealed or disguised; (viii) participating in, associating with, conspiring, attempting, abetting, instigate or counsel to commit any offences mentioned above; 1.5 Reasons of Money Laundering First, money represents the lifeblood of the organization/person that engages in criminal conduct for financial gain because it covers operating expenses and pays for an extravagant lifestyle. To spend money in these ways, criminals must make the money they derived illegally appear legitimate. Second, a trail of money from an offense to criminals can become incriminating evidence. Criminals must obscure or hide the source of their wealth or alternatively disguise ownership or control to ensure that illicit proceeds are not used to prosecute them. Third, the proceeds from crime often become the target of investigation and seizure. To shield ill-gotten gains from suspicion and protect them from seizure, criminals must conceal their existence or, alternatively, make them look legitimate. Page 8 of 69

9 1.6 Stages of Money Laundering There is no single method of laundering money. Methods can range from the purchase and resale of a luxury item (e.g. a house, car or jewelry) to passing money through a complex international web of legitimate businesses and 'shell' companies (i.e. those companies that primarily exist only as named legal entities without any trading or business activities). There are a number of crimes where the initial proceeds usually take the form of cash that needs to enter the financial system by some means. Bribery, extortion, robbery and street level purchases of drugs are almost always made with cash. These proceeds of crime have to enter the financial system by some means so that it can be converted into a form which can be more easily transformed, concealed or transported. The methods of achieving this are limited only by the ingenuity of the launderer and these methods have become increasingly sophisticated. Despite the variety of methods employed, money laundering is not a single act but a process accomplished in three basic stages which are as follows: Placement: The introduction of illegally obtained monies or other valuables into financial or non-financial institutions. Layering: Separating the proceeds of criminal activity from their source through the use of layers of complex financial transactions. These layers are designed to hamper the audit trail, disguise the origin of funds and provide anonymity. Integration: Placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds. The above three basic steps may occur as separate and distinct phases. These steps may comprise numerous transactions by the launderers that could alert a financial institution to criminal activity. They may also occur simultaneously or, more commonly, may overlap. How the basic steps are used depends on the available laundering mechanisms and the requirements of the criminal organizations. 1.7 Definition of Terrorist Financing Terrorist Financing can be simply defined as financial support, in any form, of terrorism or of those who encourage, plan, or engage in terrorism. The International Convention for the Suppression of the Financing of Terrorism (1999) under the United Nations defines TF in the following manner: 1. If any person commits an offense by any means, directly or indirectly, unlawfully and willingly, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out: a) An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the link given below; or b) Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking any active part in the hostilities in Page 9 of 69

10 a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing an act. 2. For an act to constitute an offense set forth in the preceding paragraph 1, it shall not be necessary that the funds were actually used to carry out an offense referred to in said paragraph 1, subparagraph (a) or (b). According to the article 7 of the Anti Terrorism (Amendment) Act, 2012 of Bangladesh, financing of terrorism means: Offences relating to financing terrorist activities if: (i) (ii) (iii) (iv) any person or entity knowingly provides or expresses the intention to provide money, services, material support or any other property to another person or entity and where there are reasonable grounds to believe that the same have been used or may be used in full or partially for any purpose by a terrorist person, entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. any person or entity knowingly receives money, services, material support or any other property from another person or entity and where there are reasonable grounds to believe that the same have been used or may be used in full of partially for any purpose by a terrorist person or entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. any person or entity knowingly makes arrangement for money, services, material support or any other property for another person or entity where there are reasonable grounds to believe that the same have been used or may be used in full or partially for any purpose by a terrorist person or entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. any person or entity knowingly instigates another person or entity to provide or receive or make arrangement for money, services, material support or any other property in such a manner where there are reasonable grounds to believe that the same have been used or may be used in full or partially by a terrorist person or entity or group or organization for any purpose, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. 1.8 Link between Money Laundering and Terrorist Financing The techniques used to launder money are essentially the same as those used to conceal the sources of, and uses for, terrorist financing. But funds used to support terrorism may originate from legitimate sources, criminal activities, or both. Nonetheless, disguising the source of terrorist financing, regardless of whether the source is of legitimate or illicit origin, is important. If the source can be concealed, it remains available for future terrorist financing activities. Similarly, it is important for terrorists to conceal the use of the funds so that the financing activity goes Page 10 of 69

11 undetected. As noted above, a significant difference between money laundering and terrorist financing is that the funds involved may originate from legitimate sources as well as criminal activities. Such legitimate sources may include donations or gifts of cash or other assets to organizations, such as foundations or charities that, in turn, are utilized to support terrorist activities or terrorist organizations. 1.9 Interpretation In this manual, unless there is anything repugnant in the law, subject or context: Company means Fareast Finance & Investment Limited (FFIL) The Board means the Board of Directors of the company The Management means the persons who are in the policy implementation and operational aspect of the company Managing Director means the Chief Executive of the company Executive means an Executive of the company whether temporary or permanent classified as such and includes an Executive on probation AML/CFT AML D means Anti-Money Laundering/Combating the Financing of Terrorism Anti-Money Laundering Department APG means Asia Pacific Group on Money Laundering ATA means Anti Terrorism Act BAMLCO means Branch Anti-Money Laundering Compliance Officer BFIU means Bangladesh Financial Intelligence Unit BDT means Bangladesh Taka BFIU CAMLCO means Bangladesh Financial Intelligence Unit Chief Anti-Money Laundering Compliance Officer CCU means Central Compliance Unit CDD means Customer Due Diligence CTC means Counter Terrorism Committee CTR means Cash Transaction Report FATF means Financial Actions Task Force FI FIU FSRB means Financial Institution Financial Intelligence Unit ATF Style Regional Body GPML means Global program against Money Laundering ICRG means International Cooperation and Review Group IOSCO means International Organization of Securities Commissions KYC means Know Your Customer ML means Money Laundering MLPA means Money Laundering Prevention Act NCC means National Coordination Committee NCCT means Non-cooperating Countries and Territories OECD means Organization for Economic Co-operation and Development PER means Politically Exposed Persons STR means Suspicious Transaction Report Words importing persons include both male and female employees of the company Words importing singular number shall include the plural and vice versa. Page 11 of 69

12 1.10 Variation, modification and amendment of manual The Board of Directors of the company if required in the interest of the company and to comply with Bangladesh Financial Intelligence Unit (BFIU) guidelines/circular/circular letter, may vary, modify, incorporate, amend or cancel any of the rules and regulations regarding this manual. Besides, the Board of Directors of the company if required in the interest of the company and to comply with Bangladesh Financial Intelligence Unit (BFIU)guidelines/circular/circular letter, may reform the CCU at any time. Besides, Board of Directors of FFIL shall review this manual on yearly basis if required. Section-2: Vulnerabilities of Products and Services and their overcome procedure 2.1 Lease/Term loan finance Front company can take lease/term loan finance from a financial institution and repay the loan from illegal source, and thus bring illegal money in the formal financial system in absence of proper measures. The firm can also repay the loan amount even before maturity period if they are not asked about the sources of fund. In case of financial or capital lease, the asset purchased with FI s financing facility can be sold immediately after repayment of the loan through illegal money and sold proceeds can be shown as legal. So the money launderers and terrorist financer can use this financial instrument for placement and layering of their ill-gotten money. 2.2 Factoring In international factoring there is a provision that the two firms must be member of Factor Chain International or some association that can ensure the credit worthiness of the firms. In absence of this kind of private sector watchdog in the local factoring, the supplier and the buyer may ally together to legalize their proceeds of crime. Without conducting any bona fide transaction the supplier may get finance from FIs and FIs may get repayment from buyer. FIs may focused on getting repayment without considering the sources fund which can be taken as an opportunity by the money launderer to place their ill-gotten money. 2.3 Private placement of equity/securitization of assets Some FIs offer financing facilities to firms through private placement of equity and securitization of assets. FIs sell those financial instruments to private investors who may take this as an opportunity to make their money legal. Later the money launderers can sell these instruments and bring their money in the formal financial system. 2.4 Personal loan/car loan/home loan Any person can take personal loan from FIs and repay it by illegally earned money; thus he/she can launder money and bring it in the formal channel. After taking home loan or car loan, money launderers can repay those with their illegally earned Page 12 of 69

13 money, and later by selling that home/car, they can show the proceeds as legal money. 2.5 SME/Women entrepreneur loan Small, medium and women entrepreneurs can take loan facilities from FIs and repay that (in some cases before maturity) with illegally earned money. They even do so only to validate their money by even not utilizing the loan. This way they can bring the illegal money in the financial system. 2.6 Deposit scheme FIs can sell deposit products with at least a six months maturity period. However, the depositor can encash their deposit money prior to the maturity date with prior approval from Bangladesh Financial Intelligence Unit (BFIU), foregoing interest income. This deposit product may be used as lucrative vehicle to place ill-gotten money in the financial system in absence of strong measures. 2.7 Loan backed money laundering In the loan backed money laundering method, a criminal provides an associate with a specific amount of illegitimate money. The associate then provides a loan or mortgage back to the money laundering for the same amount with all the necessary loan or mortgage documentation. This creates an illusion that the trafficker s funds are legitimate. The scheme is reinforced through legislatively scheduled payments made on the loan by the money launderer. 2.8 Vulnerabilities overcome procedure To overcome the above vulnerabilities FFIL shall take the following measures in future:. Develop sufficient capacity to verify the identification and source of funds of their clients. Human resources will be trained to become skilled enough for tracing money laundering and terrorist financing activities. To introduce anti-money laundering software for monitoring and report regarding transactions of a suspicious nature to the financial intelligence unit of BB. Page 13 of 69

14 Section-3: Compliance requirement FFIL in all cases shall comply with the provisions of Money Laundering Prevention Act, 2012 (Amended 2015), Anti terrorism (Amendment) Act, 2012 and circulars/ instructions issued by BFIU of BB in these regards. To implement this manual and compliance of instructions of BB, FFIL shall designate one high level Executive as Chief Anti-Money Laundering Compliance Officer (CAMLCO) in the Central Compliance Unit (CCU) and one officer as Branch Anti-Money Laundering Compliance Officer (BAMALCO) in the branch level. Besides, for day-to-day works FFIL Head Office, subordinated enterprises, branches, subsidiaries and affiliates shall comply with the following basic principles: 3.1 Customer identification For prevention of money laundering and terrorist financing it is mandatory to collect and verify the correct and complete identification of customers. For this purpose, FFIL shall define its customers as follows: any person or institution maintaining an account of any type or having business relationship; the person or institution as true beneficial owner in whose favour the account is operated; the trustee, intermediary or true beneficial owner of the transaction of the accounts operated by the trust and professional intermediaries (such as lawyer/law firm, chartered accountant, etc)under the existing legal infrastructure; FFIL shall identify its customers in the following cases: While entering into a lasting business relationship; While performing a single transaction or deal; While conducting financial transaction with the existing customer; Before accepting cash or other physical values worth equivalent or more of BDT 500,000 outside an existing business relationship Whenever it is required to identify a customer, FFIL shall establish and verify the identity of the ultimate natural person, who owns or controls the customer or its assets or on whose behalf the transaction is carried out or the business relationship is established 3.2 Establishment of purpose of business relationship When entering into a lasting business relationship, FFIL shall obtain information on kind and purpose thereof, if this is not clear from the business relationship itself. Customer due diligence shall be performed for high risk customers, non face to face business (if applicable), handling of PEPs. In this case PEPs shall be those individuals, who are or have been entrusted with prominent public functions in a foreign country, for example Heads of State or of government, senior politicians, senior Page 14 of 69

15 government judicial or military officials, senior executives of state owned corporations, important political party officials. For opening account in favor PEPs, FFIL should follow the instructions of Foreign Exchange Regulation Act, Identification of ultimate beneficial owner On the basis of the information obtained from reliable sources, FFIL shall identity the beneficial owner of the business/account and perform the followings: If a customer operate an account on behalf of another person in his/her own name, FFIL shall collect and preserve the complete and correct information of identity of the person(s) besides the customer. FFIL shall identify the controller or the owner of the customer. FFIL shall collect and preserve the complete and correct information of identity of the beneficial owner(s) of the customer. For this purpose, a person will be treated as a beneficial owner if: (a) he has controlling share of a company and/or (b) hold 20% or more shares of a company. 3.4 Client account monitoring FFIL shall monitor its customers account(s) including their business pattern/behavior through inspection/record verification on annual basis to detect unusual/suspicious transactions. In case any unusual/suspicious transactions are found, FFIL shall take appropriate measures for STR to BB. 3.5 Reporting of suspicious circumstances/transactions (STR) According to Section 2(z) of MLPA 2012 suspicious transaction shall mean such transaction: which deviates from usual transactions; of which there is ground to suspect that, the property is the proceeds of an offence it is financing to any terrorist activity, a terrorist group or an individual terrorist; any other transaction or attempt of transaction delineated in the instructions issued by Bangladesh Financial Intelligence Unit (BFIU)from time to time In the above circumstances/transactions FFIL shall report to Bangladesh Financial Intelligence Unit (BFIU) through STR. CAMLCO and BCAMLCO shall always be informed about all suspicious circumstances/transactions. 3.6 Correspondent business FFIL shall pay special attention to business done only through correspondent. 3.7 Staff reliability It is the responsibility of each employee to become familiar with rules and regulations that relate to his or her assignment. Moreover, disciplinary action would be taken if employees consistently fail to perform in accordance with AML/CFT framework for Page 15 of 69

16 a consecutive period of six months. Besides, FFIL shall complete the KYE before appointment in the company. 3.8 Communicating the policies The Managing Director shall communicate to all employees on annual basis through a statement that clearly sets the policy against money laundering and any activity which facilitates money laundering or the funding of terrorist or criminal activities. This statement shall also be submitted to the Board of Directors via Board Audit Committee. This statement shall include the following: A statement that all employees are required to comply with applicable laws and regulations and corporate ethical standards. A statement that all activities carried out by the financial institution must comply with applicable governing laws and regulations. A statement that compliance with rules and regulations is the responsibility of each individual in the financial institution in the normal course of their assignments. It is the responsibility of the individual to become familiar with the rules and regulations that relate to his or her assignment. Ignorance of the rules and regulations cannot be an excuse for non-compliance. A statement that should direct staff to a compliance officer or other knowledgeable individuals when there is a question regarding compliance matters. A statement that employees will be held accountable for carrying out their compliance responsibilities. 3.9 Anti Money Laundering controls FFIL shall ensure that all applicable AML requirements are being adhered to and security measures are properly functioning in the company in all respects Employee appointment and training Before appointing any employee FFIL shall perform the screening mechanism through KYE in details with proper records/documents. Within two months of appointment all employees (including trainees and temporary personnel) responsible for carrying out transactions and/or for initiating and/or establishing business relationships shall undergo anti money laundering training process and subsequently after every three years. Chief Anti Money Laundering Compliance Officer shall fix the training modules. Besides, if management thinks proper, FFIL may time to time distribute leaflets among customers to make them aware about money laundering and terrorist financing and also arrange to stick posters in every branch at a visible place Anti Money Laundering risk analysis At the time of analyzing the credit risk, FFIL Executives shall analyze the Anti Money Laundering risk exposure considering product and client risk and mitigate the same. Page 16 of 69

17 3.12 UN sanctions FFIL shall take all necessary actions on UNSCR 1267 and 1373 (targeted financial sanctions). To comply with this direction, FFIL shall prepare a software regarding the UN sanction list for regular searching and if find any account with it, shall inform BFIU immediately. Page 17 of 69

18 Section-4: Risk Assessment Procedure of FFIL The success of AML&CFT program highly depends on efficient assessment of related threat/vulnerability/risk and placing necessary tools for combating ML&TF risks as per the result of assessed threat/vulnerability/risk. FFIL is trying to categorize the risks which will help determine the level of AML&CFT resources necessary to mitigate that risk assessment process is developed to take appropriate steps to identify and assess the company s money laundering and terrorist financing risks for customers, countries or geographic areas, products, services and transactions or delivery channels. 4.1 Risk group: Customers Risk Likelihood Impact Risk score Treatment/ Action New customer Likely Moderate Medium Standard ID check = CDD: New customer who wants to Likely Moderate Medium Standard ID check = CDD: carry out a large transaction Verification of source of fund Customer or group of customers Likely Moderate Medium Standard ID check = CDD: making lots of transactions to the same individual or group Verification of source of fund KYC of BO (if any) Customer who has a business which involves large amounts of cash Very Likely Minor Medium Standard ID check = CDD: Standard KYC Verification of source of fund Verification of information Page 18 of 69

19 Customer whose identification is difficult to check Customer who brings in large amounts of used notes and/or small denominations Customer who has significant and unexplained geographic distance between the institution and the location of the customer Customer who has frequent and unexplained movement of accounts to different institutions Customer who has frequent and unexplained movement of funds between institutions in various geographic locations Unlikely Moderate Low Standard ID check = CDD: Unlikely Moderate Low Standard ID check = CDD: Very Likely Moderate High Standard + additional ID check = EDD: Customer Due Diligence: Verification of source of fund Enhanced Due Diligence: Additional information and documents to be collected and updated i.e. Occupation, Wealth Statement, explanation of transaction etc. Transaction to be done after getting prior permission from top management. Likely Minor Low Standard ID check = CDD: Unlikely Minor Low Standard ID check = CDD: Page 19 of 69

20 Non- resident customer Unlikely Minor Low Standard ID check = CDD: Information to be collected as per the directives of Guidelines of for Foreign Exchange Transactions. Corporate customer whose Likely Moderate Medium Standard ID check = CDD: ownership structure is unusual and excessively complex KYC of BO (if any) Verification of source of fund Customers that are politically exposed persons (PEPs) or influential persons (IPs) or head of international organizations and their family members and close associates Very Likely Moderate High Standard + additional ID check = EDD: Customer Due Diligence: Obtain and maintain correct Verification of source of fund Enhanced Due Diligence: Additional information and documents to be collected and updated i.e. Occupation, Wealth Statement, explanation of transaction etc. Transaction to be done after getting prior permission from top management. KYC of BO (if any) Regular monitoring of transaction. Information to be collected as per the directives of Guidelines of for Foreign Page 20 of 69

21 Customer submits account documentation showing an unclear ownership structure Customer opens account in the name of his/her family member who intends to credit large amount of deposits not consistent with the known sources of legitimate family income Customer comes with premature encashment of fixed deposit Customer generally tries to convince for cash deposit but insists for financial instrument while withdrawing the deposit Customer who wants to settle his loan early Exchange Transactions. Unlikely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Likely Moderate Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Unlikely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Unlikely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Transaction to be done through bank instrument Likely Moderate Medium Standard ID check = CDD: Page 21 of 69

22 Government employee having several large amounts of fixed deposit accounts Customer who has an unusual or excessively nervous demeanor Customer who discusses your record-keeping or reporting duties with the apparent intention of avoiding them Customer who threatens an employee in an effort to discourage required recordkeeping or reporting Customer who is reluctant to proceed with a transaction after being told it must be recorded Verification and update of source of fund Likely Moderate Medium Standard ID check = CDD: Verification and update of source of fund Likely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Very Likely Minor Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Likely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Likely Minor Low Standard ID check = CDD: Page 22 of 69

23 Customer who appears to have a hidden agenda or behaves abnormally, such as turning down the chance to obtain a higher interest rate on a large account balance Agent, attorney or financial advisor who acts for another person without proper documentation such as a power of attorney Customer who furnishes unusual or suspicious identification documents and is unwilling to provide personal data Business customer who is reluctant to reveal details about the business activities or to provide financial statements or documents about a related business entity KYC of BO (if any) Verification of source of fund Likely Moderate Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Unlikely Minor Low Standard ID check = CDD: Legal status of agent, attorney or financial advisor to be verified Verification of source of fund Likely Moderate Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Unlikely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Page 23 of 69

24 Customer who opens several accounts in or more names, then makes several cash deposits under the reporting threshold Customer who conducts large cash transactions at different branches on the same day, or orchestrates persons to do so in his/her behalf Customer whose financial statement makes representations that do not conform to accounting principles Customer who suddenly pays off a large problem loan with no plausible explanation of source of funds Customer who purchases certificates of deposit and uses them as collateral for a loan Business customer who presents financial statements noticeably different from those of similar Likely Moderate Medium Standard ID check = CDD: Fund to be collected through bank instrument. KYC of BO (if any) Verification of source of fund Unlikely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Likely Moderate Medium Standard ID check = CDD: KYC of BO (if any) Likely Moderate Medium Standard ID check = CDD: Verification and update of source of fund Update of KYC Unlikely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of utilization of fund Likely Moderate Medium Standard ID check = CDD: Page 24 of 69

25 businesses Large business presents financial statements that are not prepared by an accountant KYC of BO (if any) Verification of source of fund Likely Moderate Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Risk group: Products and services Risk Likelihood Impact Risk score Treatment/ Action Prioritized or privileged financial Likely Moderate Medium Standard ID check = CDD: service KYC of BO (if any) Anonymous transaction Unlikely Major Medium No transaction to be done. Non face to face business Unlikely Minor Low Identify ML & TF risk relationship or transaction Policy to be prepared to reduce risk Review the policy time to time. Payment received from unknown Unlikely Minor Low Identify ML & TF risk or unrelated third parties Any new product and services Unlikely Minor Low Identify ML & TF risk developed Policy to be prepared to reduce risk Review the policy time to time. Service to walk-in customers Unlikely Minor Low Standard ID check = CDD: Short KYC KYC of BO (if any) Page 25 of 69

26 Syndicate financing Likely Major High Standard + additional ID check = EDD: Customer Due Diligence: Enhanced Due Diligence: Additional information and documents to be collected and updated Vetting of syndicated documents Verification fund utilization Transaction to be done after getting prior permission from top management. Regular monitoring of transaction. Receivable financing Unlikely Major Medium Standard ID check = CDD: Home equity and loan against FDR/deposits/financial instruments Obtain and maintain correct KYC of BO (if any) Verification of source of fund Verification of documents of receivables Likely Moderate Medium Standard ID check = CDD: Standard KYC KYC of BO (if any) Monitoring of utilization of fund. Sale and lease back facility Likely Major High Standard + additional ID check = EDD: Customer Due Diligence: Obtain and maintain correct Enhanced Due Diligence: Additional information and documents to be collected Page 26 of 69

27 and updated Ownership of the assets to be verified Verification of fund utilization Transaction to be done after getting prior permission from top management. Regular monitoring of transaction. Working capital finance Very Likely Minor Medium Standard ID check = CDD: Monitoring of utilization of fund. Short term loan to different Likely Moderate Medium Standard ID check = CDD: business concern to meet urgent fund requirement for any interim period Monitoring of utilization of fund. SME tailored loan Likely Moderate Medium Standard ID check = CDD: Obtain and maintain correct Standard KYC KYC of BO (if any) Monitoring of utilization of fund. Risk group: Business practice/delivery methods or channels Risk Likelihood Impact Risk score Treatment/ Action Direct to the customer Very Likely Minor Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Online/internet Very Likely Minor Medium Standard ID check = CDD: Page 27 of 69

28 KYC of BO (if any) Verification of source of fund Phone Unlikely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Fax Likely Minor Low Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Very Likely Minor Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Third-party, agent or broker Likely Moderate Medium Standard ID check = CDD: KYC of BO (if any) Verification of source of fund Verification of legal status of third-party, agent or broker Page 28 of 69

29 Verification of information Monitoring of transaction. Risk group: Country/jurisdiction Risk Likelihood Impact Risk score Treatment/ Action Country which is unidentified by Unlikely Minor Low credible sources as having significant level of corruption and criminal activity Country subject to economic or Unlikely Minor Low trade sanctions Country known to be tax haven Unlikely Minor Low and unidentified credible sources as providing funding or support for terrorist activities or that have designated terrorist organizations operating within their country Country unidentified by FATF or Unlikely Minor Low FSRBs as not having adequate AML & CFT system Country identified as designation Unlikely Minor Low of illicit financial flow Branch in any land port, sea port city or any border area Unlikely Minor Low Risk group: Regulatory risk Risk Likelihood Impact Risk score Treatment/ Action Customer/beneficial owner identification and verification not Unlikely Major Medium Create awareness of employee done properly Arrange training program regularly. Failure to keep record properly Unlikely Major Medium Create awareness of employee. Arrange training program regularly. Failure to scrutinize staffs properly Unlikely Moderate Low Verify employee through CMMS at the time of joining Maintain KYE Failure to train staff adequately Likely Moderate Medium Arrange training program regularly. Not having an AML & CFT program Unlikely Moderate Low Preparing AML & CFT program. Failure to report suspicious Unlikely Major Medium Strengthening the CCU transactions or activities Monitoring ML & TF issue. Not submitting required report to Unlikely Major Medium Strengthening the CCU BFI U regularly Monitoring report submission status regularly. Not having an AML & CFT Compliance Officer Unlikely Moderate Low Appoint an AML & CFT Compliance Officer. Page 29 of 69

30 Failure of doing Enhanced Due Diligence (EDD) for high risk customers (i.e., PEPs, IPs) Not complying with any order for freezing or suspension of transaction issued by BFIU or BB Not submitting accurate information or statement requested by BFIU or BB Likely Moderate Medium Create awareness of employee. Arrange training program regularly. Unlikely Major Medium Maintain separate statement and monitoring the same regularly. Likely Moderate Medium Checking of information or statement by higher authority. Section-4: Central Compliance Unit and its reporting 4.1 Establishment of Central Compliance Unit (CCU) To ensure compliance, a six member Central Compliance Unit will be formed in FFIL. The first unit will be comprised with the following officials: Sl. # Name of the members Status in CCU 1 Mr. Md. Anwar Hussain Chairman 2 Mr. Mohammad Rofiqul Alam Member 3 Ms. Farhana Yesmin Member 4 Mr. Md. Abdullah Al Mamun Member 5 Mr. Md. Iqbal Haque Choudhury Member 6 Mr. Sehikh Khaled Zahir Member Secretary CCU is authorized to adopt new member(s) if they think proper. The quorum for CCU meeting will be four members present in person for that meeting. The Member Secretary shall keep the meeting records in proper manner. 4.2 Responsibilities of CCU CCU will prepare and issue instructions to be followed by the branches; on the basis of combination of issues in monitoring of transactions, internal control, policies and procedures from the point of view of preventing money laundering and terrorist financing. CCU shall be dedicated solely to the organization s related responsibilities and perform the compliance functions. The responsibilities of CCU include: (i) (ii) (iii) Preparing an overall assessment report after evaluating the self assessment reports received from the branches and submitting it with comments and recommendations to the Managing Director on half yearly basis; Preparing an assessment report on the basis of the submitted checklist of inspected branches by the Internal Compliance Department on that particular quarter; Submitting reports to BFIU according to the guidelines issued by Bangladesh Financial Intelligence Unit (BFIU). Page 30 of 69